Gartner, IDC Paint Different Pictures of European Server Market

Gartner and IDC each released 2Q03 server stats for the European server market late last week. While the research firms' results were similar, the interpretations couldn't be more different, giving truth to the saying, "lies, damn lies, and statistics."

Gartner and IDC each released 2Q03 server stats for the European server market late last week. While the research firms' results were similar, the interpretations couldn't be more different, giving truth to the saying, 'lies, damn lies, and statistics.'

On the surface the results look similar: Both research firms reported server shipments way up and revenue near flat.

Both research firms awarded top spots to Hewlett-Packard, IBM, Dell, Fujitsu Siemens, and Sun Microsystems in varying order (not surprising given that their regional breakdowns differed). HP took Gartner's top spot with a 39.2 percent market share; IBM took second place with 16.9 percent. IDC's finding awarded the top spot to Big Blue, with 31.0 percent market share, and second place to HP, with 29.6 percent.

According to Gartner's results, the server market in Europe, the Middle East, and Africa (EMEA) saw double-digit growth in 2Q03. Server shipments increased 21 percent to 373,000 units, while revenue grew 5 percent, to $3.7 billion, compared to the same period for 2002.

The Middle East and Africa showed the strongest growth, with an increase of 37 percent.

IDC's latest quarterly server tracker results, which segmented the markets differently and kept the Western European server market separate, showed a market space that continued to generate positive unit shipment growth as well as a further slowdown in revenue declines when measured on a current dollar basis.

According to IDC, the European server market grew 16.9 percent in unit shipments, reaching 299,000 units in 2Q03. Factory revenues were $2.94 billion, 0.4 percent lower than they were for the same quarter a year ago.

However, Martin Hingley, vice president of IDC's European Systems Group, pointed out, "On the surface, the revenue results measured in current dollars achieved this quarter look promising, but when looking at exchange rate fluctuations, revenues in constant dollars show a much steeper decline."

Thomas Meyer, manager of IDC's European Server Group, added, "As vendors further decrease prices, capitalizing on the favorable euro/dollar conversion, this has a severe effect on margins, yet again forcing vendors to revisit their business models from supply chain, to manufacturing, to channels and internal organization."

In contrast, Karen Benson, research vice president at Gartner, attributes a number of more positive factors to the growth spurt, "Pent-up demand for upgrades and replacements within the installed base, as well as the availability of new technologies, were the main drivers, but the weakness of the dollar was a significant factor in boosting demand."

Benson added, "The market has finally seen revenue growth following several quarters of decline, but much of this is driven by the low end of the market. Spending remains weak at the high-end, which highlights the caution still prevalent among users."

Gartner believes these results bode well for the second half of 2003. It foresees shipment growth remaining positive, with growth levels somewhat reduced from the high levels seen in 2Q03.

IDC, on the other hand, noted the gap in growth between unit sales and revenues was increasing, with continuing pricing initiatives pushing down average system prices. In 2Q03, average system prices decreased close to 15 percent, compared to 2Q02, to $9,822.

The x86 server market (i.e., systems based on Intel and AMD processors) is one example of this. The 21.6 percent increase in this segment had the largest impact on unit sales and was a result of the volume and midrange enterprise markets increasing the number of units shipped along with revenue. Only the high-end enterprise server segment saw high single-digit unit and revenue decline. However, overall the x86 segment saw only a 0.4 percent in customer spending.

EPIC system sales grew 367 percent compared to 2Q02 but remain a marginal segment in the server market with 0.1 percent of total shipments and 0.3 percent of revenue.

Blade system sales increased 311 percent in 2Q03.

Both Windows and Linux continued to grow strongly. Windows continued to command the lion's share of the unit market with 59.3 percent, while Linux grew its share to 16.3 percent. In revenue terms, Unix continues to hold the majority share, generating twice the revenue of Windows systems.